When it comes time to retire, people don’t just think about how they will pay for retirement; they also think about how they will pay for the kind of care that they want in the event that their health declines.
The solutions you consider will invariably depend on your financial resources and your goals for your long-term care needs. If you plan to use Medicaid to support your care needs, for example, you should familiarize yourself with the Medicaid eligibility requirements and rules, including the look back period.
Medicaid’s “look-back” period explained
Backing up a little bit, we should explain that Medicaid benefits are available to people who meet the financial and non-financial eligibility requirements of the program. One such requirement is that a person cannot have a significant sum of money saved up that they are not spending on care needs. As noted in this Forbes article, a person can qualify for Medicaid once their financial assets have been exhausted.
This could certainly present problems for people who wish to leave money to loved ones in the event of their death but also want to qualify for Medicaid. Giving money away in the weeks, months or years leading up the time you want to apply for benefits will not work, thanks to this look back period.
The look back period is the five years before you apply for Medicaid. In assessing Medicaid applications, the federal government will look back at your financial transactions in the five years prior to your application date. If there are any significant assets transferred or given away during those 60 months, then those transactions can be subject to penalties that extend your eligibility date.
Planning ahead to leave the legacy you want to
In order to avoid these penalties, any gifts or transfers you make should be made outside of this look back period. In other words, it can be crucial that you start making plans for how you want to give away your money or transfer it well in advance of applying for Medicaid.
Rather than hope everything works itself out or take the risk of suffering financial penalties by not planning ahead, it can be critical that you consult an attorney to discuss your long-term care, financial and estate planning goals. With legal guidance, you can take steps now that can save you money and minimize stress in the future.